What initial duration does a short moratorium last for when proposing a CVA?

When proposing a Company Voluntary Arrangement (CVA), the initial duration of a short moratorium is set at 28 days. This moratorium provides the company with breathing space to develop and finalize a proposal for the CVA without the immediate threat of being pursued by creditors. During this period, creditors cannot take legal action against the company, allowing it to focus on restructuring its debts.

The length of 28 days is significant as it strikes a balance between giving the company enough time to formulate a viable proposal while ensuring that creditors are not left waiting indefinitely. This framework facilitates a more efficient turnaround for financially distressed companies, enhancing the chances of successfully negotiating a CVA.

Understanding the specific duration of the moratorium is crucial for both practitioners and clients, as it plays an integral role in the strategy for navigating financial difficulties. This time limit also reflects the legal framework and best practices established to support corporate recovery in the UK.